FCC funding shortage imperils telecoms, health providers

Alaska Native Tribal Health Consortium Telehealth Coordinator Jordan Berg shows off a video otoscope, one of the many peripherals featured on telemedicine carts that are used in rural clinics around Alaska. Alaska telecoms that provide high-speed broadband for internet and telehealth services at rural clinics are being squeezed by an FCC funding shortfall that has them short millions of dollars over the past year. (Photo/Courtesy/Alaska Native Tribal Health Consortium)

The hospital in Cordova has received a shut-off notice from Alaska Communications for its broadband services unless a balance of nearly $1 million is paid by June 30.

Now Federal Communication Commission Chairman Ajit V. Pai has stepped into the dispute and warned the Anchorage-based telecom provider that it’s against the Communications Act to shut down services.

“Alaska Communications is prohibited from engaging in unjust and unreasonable practices or from discontinuing service to a community without prior Commission approval,” Pai wrote to CEO Anand Vadapalli on May 8.

The exchange is “at least is shedding a light on a lack of funding problem,” said Cordova Community Medical Center Administrator Scot Mitchell.

Alaska Communications Vice President of Finance Laurie Butcher wrote to Mitchell on May 2 stating that a 10-month outstanding bill of $964,370 needs to be paid or service will be shut off on July 1.

Alaska Communications hasn’t received funding for going on 11 months through a federal program that bridges the high cost of bringing broadband service to rural Alaska, called Rural Health Care, or RHC. The Cordova hospital is just one of about 40 rural health care facilities that Alaska Communications supplies broadband services.

In Cordova’s case, the total hospital Internet bill is $80,100 per month.

After the RHC subsidy is paid to the telecom, “what we pay is $1,060 per month,” said Mitchell.

The remaining $79,040 per month would fall under the category of the RHC funding portion, he said.

“In the past, the Rural Health Care division of USAC made funding decisions in a short enough time that we could provide your service and only charge you the urban rate,” Butcher wrote to Mitchell. “This was not the case the past two years. We are now 10 months into the current funding year and your funding request is still being put through an ‘enhanced review’ by USAC.”

USAC is the Universal Services Administration Company, which disperses the RHC funds.

“USAC has not yet acted on the vast majority of our rural healthcare customers’ funding requests,” Alaska Communications stated in its first quarter report.

In December, Alaska Communications laid off 30 workers, instituted wage cuts and put employees on furlough just to stay afloat under the loss of RHC revenue, said Leonard Steinberg, the company’s vice president of legal, regulatory and government affairs. The layoffs represented 5 percent of its workforce.

As of Dec. 31, 2017, according to its first quarter earnings report, Alaska Communications was owed $8.6 million in RHC funds, a total that has now grown to $11.8 million as of March 31.

“We’re almost all the way through the current funding year without receiving anything since last July,” Steinberg said.

“Every month we’ve taken money out of our pockets. This company and its employees have put their lives on the line to subsidize health care services. We’ve been willing to do it for a while to resolve funding issues, but we can only go so long,” he said.

In its first quarter report released May 10, GCI Liberty also reported a huge shortfall in RHC funding of $5.5 million.

“We may need to further reduce the RHC Program support receivable as we pursue avenues for payment of the shortfall,” according to the GCI Liberty filing. “USAC’s assessment of the program funding shortfall caused a program-wide delay of support payments, which has continued during the review of rates charged by Alaska carriers.”

In a statement, GCI Liberty spokeswoman Heather Handyside called the situation “troubling” and said that the company, “has been working with rural providers, the FCC, and the Alaska congressional delegation to develop a solution to maintain this critical source of support for rural Alaska health care.

“Because this year’s funding reduction is much greater than last year, it is causing deep concern for our rural health care customers,” Handyside wrote in an email. “GCI has not proposed reducing or terminating service to any of our customers. We are continuing to work with them and other concerned parties to secure a responsible, long-term solution. We agree with the bipartisan group of 31 U.S. senators who are proposing an overhaul of the Rural Health Care program to meet the growing demands of connectivity for rural providers.”

USAC funding help

All of Alaska’s telecoms get funding support for rural services through the USAC, which allocates from four budgets. One is the E-Rate funding for schools and libraries to make internet more affordable; another provides the Lifeline telephone-internet funding. A separate category is the RHC funding. For the past 20 years, rural communities in Alaska and the Lower 48 split an annual pot of about $400 million for the RHC funds alone.

Alaska’s portion of that was $122 million in 2016, according to FCC spokesman Mark Wigfield.

But the funding help hasn’t been enough over the past two years after Rural Health Care funds ran out. The new filing window for telecoms to receive funding goes from Feb. 1 to June 29, 2018.

USAC put a notice on its website alerting telecoms that the “net demand of all funding requests received by the close of the FY2017 filing window period exceeded available RHC Program funding.”

The 2017 funding year runs from July 1, 2017 to this June 30.

But there will be a prorating “percentage of funding” for the next funding year, the notice stated. In other words, telecoms can expect to get about 84.6 cents on the dollar, rather than the full amount of RHC funds after an invoice is submitted.

One of the problems is that technology, needs and services have broadened the reach of broadband in the past 20 years, while the RHC funding never stretched with it, Steinberg said.

“For first time, the demand for RHC funds exceeded the budget,” Steinberg said of funding year 2017. “That woke the FCC up. They wanted to look at how to reduce the demand to stay within our budget. They’ve been applying what they call ‘enhanced scrutiny’ to filings.”

Steinberg said he’s had direct communication with FCC Commissioner Pai over the current crisis, hoping to bring the Alaska telecoms’ funding crisis to light.

Pai’s letter wasn’t without sympathy. He recalled his own childhood “as the son of two doctors in rural Kansas. I understand how connectivity can play a transformative role in the provision of medical care,” he wrote to Vadapalli. “I recall my father driving many miles at times to see patients in remote areas.”

But the Communications Act makes clear that “Alaska Communications must continue to provide services to the rural healthcare providers it serves upon a bona fide request for service.”

To put it another way, he wrote, “Alaska Communications many not deny or cut off service to any of its existing rural health care provider customers.”

If it does so, the FCC could cite it for violating the federal Communications Act.

Cordova’s medical needs

Mitchell said he’s surprised Pai has gotten involved. But he hopes this means solutions are on the way.

“For us, if this does happen (a broadband cutoff) we will probably have to close our hospital,” Mitchell said. “Our electronic health records are on the cloud. We rely on it for X-ray and CAT scans, our entire telemedicine system. Our payroll system uses the internet. We won’t even be able to pay our staff.”

Cordova’s famous Copper River salmon season starts May 17. That means the year-round population of 2,200 will swell to 5,000 as the fishing season and canneries crank up.

The Cordova Community Medical Center is the only 24-hour emergency care in the active commercial fishing hub region, 300 air miles from Valdez and 200 air miles from Anchorage.

Mitchell said he doesn’t have harsh feelings against Alaska Communications.

“My understanding is that ACS is for us, and the other facilities,” he said. “They are paying out of their pocket the money the FCC has been withholding.”

Cordova isn’t the only facility that received a letter calling bills due, said Becky Hultberg, the president and CEO of Alaska State Hospital and Nursing Home Association.

“The fallout from the FCC’s decision to impose funding cuts to the USAC Rural Health Care fund is significant,” she said, and added that Alaska congressional delegation is working on resolving the shortage of RHC funds.

And there may be a legal argument Alaska telecoms can make, she said.

“It is ACS’ opinion that the FCC neglected to mention in their letter that the law also states that telecommunication carriers are entitled to the difference between urban and rural rates,” Hultberg wrote in an email. “We do not know who would prevail in court, but we do know that health care in Alaska will suffer greatly if internet services are disconnected.”